Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 14

Variable Overhead Variances; Journal Entries The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes direct materials, direct labor, and manufacturing overhead. The firm traces all direct costs to products, and it assigns overhead based on direct labor-hours.
The company budgeted $15,000 variable overhead and 2,500 direct labor-hours to manufacture 5,000 pairs of boots in March 2013.
The factory used 2,700 direct labor-hours in March 2013 to manufacture 4,800 pairs of boots and spent $15,600 on variable overhead during the month.
Required
1. Compute the flexible-budget variance, the spending variance, and the efficiency variance for variable overhead for March.
2. Provide appropriate journal entries to record the variable overhead spending and efficiency variances.
3. Comment on the factory's operation in March 2013 with regard to variable overhead cost.